As retirement villages vary greatly in the types of accommodation and in the services provided, it is important to carefully consider how much you can afford to pay. It is essential you read the residence contract to determine exactly what fees will be payable prior to entering the village, during your occupation of premises and after you leave the village. 

Typically fees and charges fall into 3 categories:

• in-going / entry costs;
• on-going costs; and
• exit costs.

In-going / entry costs

Before entering a village, prospective residents are usually required to make a payment known as a ‘premium’. This is generally a one-off, upfront payment and, depending on the particular legal structure, can range from a nominal amount to an amount equivalent to the cost of buying the premises. Sometimes this amount may take the form of a non-refundable payment, an interest free loan to the operator or it can be the purchase price in a strata or purple title village. There can also be other fees such as wait list fees, administration fees etc.

These costs are in addition to any costs incurred in selling the family home.

On-going costs

The on-going costs include recurrent charges, usually payable monthly, you pay while living in the village. Recurrent charges generally cover operating costs and expenses of running the village and providing services  for the benefit of all residents. These might include village administration, maintenance of the communal property and grounds, amenities and resident services.

Each village has its own terms for fees and charges. Depending on the type of legal structure and financial model used by the operator, recurrent charges might also include rent or body corporate fees. Recurrent charges are not regulated and may increase while you live in the village. If you move into the village as a couple, consider whether the fees will be affordable if one of you enters aged care or passes away.

In addition to recurrent charges, you may have to pay levies, which can include a component for capital maintenance or replacement. These levies may be paid into a sinking or reserve fund.

Exit costs

When you cease living in a retirement village unit there will be a range of exit costs payable including:

• paying recurrent charges for a period after you terminate your contract;
• costs associated with refurbishment of the premises you occupied;
• exit fees (sometimes called a Deferred Management Fee or ‘DMF’);
• reserve fund contributions;
• costs associated with marketing the premises you occupied.

On-going requirement to pay recurrent charges

Under most residence contracts recurrent charges continue to be payable for some time after leaving a village. How long you must continue to pay recurrent charges will be dependent on your type of tenure and when you signed your residence contract. Different rules apply to owner residents (strata and purple title villages) and non-owner residents (lease/licence villages) as follows:

• For owner residents (strata or purple title villages), normally the contract will require that you must continue to pay recurrent charges until the unit is sold and settlement occurs. This can be a lengthy process.
• For non-owner residents (lease/licence villages):
  • if you signed your contract after 1 April 2014, the requirement to continue to pay recurrent charges ceases three months after you permanently vacate your unit or evidence of death is provided.
  • (For contracts signed before 1 April 2014 the requirement to continue to pay recurrent charges ceases six months after you permanently vacate your unit or evidence of death is provided.

In all cases, the retirement village must stop charging you if the unit you have vacated is sold or re-leased during this time.

These time periods are  explained in the flow chart guide to time caps on recurrent charges

These time periods may however be slightly longer for deceased estates as the time period links to the operator of the village receiving evidence of the former resident’s death or the premises being permanently vacated, whichever is later. Evidence of a former resident’s death may be evidence of the grant of probate or letters of administration or documentation the administering body accepts as evidence of the resident’s death such as a death certificate.

To find out how these provisions may affect you, please contact the Seniors Housing Advisory Centre on 1300 367 057.

Exit fees and other expenses

Prior to entering into a residence contract you must be given a range of information including information about your rights under the residence contract to a refund of the whole or part of any premium that will be payable if you want to leave the village. Such information must include:

• the method of calculation used to determine the refund and when it is to be paid;
• any fees or commissions to be paid by you to the village operator; and
• any other costs or charges that may be deducted from your refund entitlement.

It is important you read and understand the terms of the residence contract about when you will be paid a refund after leaving a village because in most instances the repayment will be conditional on a new resident paying a premium to occupy the premises you formerly occupied.  In this regard, you need to think about how you would fund your ongoing expenses outside the village, including possible aged care costs, in the event there is a period of time between your leaving the village and a new resident entering.